Ahead of the company’s upcoming earnings, Peloton CEO John Foley took a break from a “quiet period” to address a series of reports related to poor device sales. The executive denied that the company is halting production on its entire line of bikes and treadmills, as demand for the devices began to slump amid the reopening of gyms.
Under the title, “Rumours that we are halting all bike and treadmill production are false,” Foley writes:
[W]and we find ourselves in the midst of a hundred-year event with the COVID-19 pandemic, and what we predicted would happen over three years happened in months during 2020 and 2021.
We worked quickly and diligently to meet demand head on at a time when the world really needed us, thanks in large part to how hard you worked every day. We feel good about correctly sizing our production, and as we evolve towards more seasonal demand curves, we are resetting our production levels for sustainable growth.
In a separate statement linked to the preliminary earnings, Foley states:
As we discussed last quarter, we are taking significant corrective actions to improve our profitability prospects and optimize our costs across the enterprise. This includes gross margin improvements, moving to a more variable cost structure and identifying reductions in our operating expenses as we build a more future-focused Peloton.
He adds that the company hopes to share more information about the moves when Peloton releases its earnings on Feb. 8. on all four of your bike/treadmill devices will stop for weeks or months.
Foley also acknowledged reports of restructuring and layoffs, following a report from consultancy McKinsey. “In the past, we said layoffs would be the absolute last lever we would ever hope to pull,” he writes. “However, we now need to assess our organizational structure and the size of our team with the utmost care and compassion. And we are still considering all options as part of our efforts to make our business more flexible.”
These reports were seen as confirmation that Peloton overreacted amid the surge in adoption during the aforementioned “once in a hundred years event”. The news comes after the company experienced a 76% drop in stock last year following an astronomical rise in 2020 due to the strength of demand from the pandemic.